2. To study whether bank’s request for a significant reduction in the overdraft facility granted to Summer Bodysuit Limited is reasonable. Structure of the organization The financial problems in a company arise mainly due to weakness in the structure of the organization. Jill Dempsey and Mike Greaves have good experience in the company’s business. The business model, designing and manufacturing of casual and leisure clothes aiming particularly at the younger and higher-income market, is in line with their experience. However, the weakness in the organization structure lies in lack of proper system for financial management. Financial management is a specialized area which needs expertise for efficiency in business operations. Keeble brothers’ involvement in the day to day business activities has been very limited. The business has grown well over the period of time and the order recently received from Arena, a chain of casual and sportswear stores is seen particularly important. The draft accounts from the Auditors confirm the company’s success. But, lack of suitable system for working capital management and planning in capital investment has landed the company in the current financial difficulties. Relationship with the bank and planning for the future The bank wants the company to reduce the overdraft by half over the next six months. The company had breached its overdraft limit on several occasions over the past few years. The management is aware of the fact that the patience of the bank has been wearing thin. The largest shareholder of the business is Keeble Estates Ltd, owned by David and John Keeble. Neither they are in a position to make further investments nor willing to accept investments from new investors, fearing loss of influence over the company. It is in this backdrop the analysis is done to make suitable recommendations for taking necessary actions to overcome the current financial difficulties. Business operations Dechow et al (2010) state, “the quality of a ?rm’s earnings depends on both the ?rm’s ?nancial performance and on the accounting system that measures it.” Prima facie the company has not accorded the deserved attention to accounting in the organization. The management has embarked on investment spree without making necessary arrangements for the additional working capital needed for its operations. David et al (2007) states that “overcon?dent managers underestimate risk and therefore take actions with excessive risk”. Evaluation of the business prospects involves analysis of several factors relating to the business. Schrand and Zechman (2009) state that “the overconfident managers make optimistic forecasts and in order to meet these forecasts, exhibit higher levels of fraud and earnings management.” Though the results do not in any way suggest fraud its management of finance calls for critical analysis. Gross profit margin during the last two years has been at 14.99% and 20.61% respectively which reflects the soundness of the business proposals of Jill Dempsey and Mike Greaves. The increase in capital investment and consequently working capital required additional investments which are met primarily through bank overdraft. “An overdraft facility enables businesses to obtain short-term funding - although in theory the amount loaned is repayable on demand by the bank” (Riley, 2012). The bankers are now asking the company to reduce the
Report on Summer Bodysuit Ltd. The report as required by the Board of Directors has been prepared with reference to the following requirements based on the working results for the current year and the previous year and the balance sheets for the corresponding period as at the close of the years, and submitted for the consideration of the Board…
Contents: 1.1 Introduction 1.2 Culure of the Company 1.3 Stabilo’s New Mission 1.4 Greener Environment 1.5 “Colors for a Greener World” 1.6 Make Up Paris 1.7 Beauty World Middle East 1.8 Guerilla Marketing Campaign 2.0 Recommendations 3.0 Conclusion 1.1 Introduction Schwan Stabilo was founded in Nuremberg, Germany way back in 1855 by a pencil company and was, since 1865, been owned by Schwanhausser family and has remained so for five generations.
Moreover, Fortress Ltd. was not incorporated until the following month, March. All indications are therefore that the loan agreement was established before Fortress Ltd. was actually incorporated. Adam’s liability is therefore established on the basis of a pre-incorporation contract and liability will be applicable is Adam is by law, a promoter of the company.
The non-current assets that are expected to produce benefits for more than one accounting period have been classified in the category of PPE. The use of historical information has been adopted by the company in valuing the property, plant and equipment. The risks and rewards of the PPE have been assumed to pass over to the company (Warren, 2010, p.34).
The investors are interested in the management structures and the leadership styles of the organisation. This report makes a primary as well as a secondary research to scan the business environment of the two organisations and analyses the best prospects from an investment point of view.
Schwan Stabilo was founded in Nuremberg, Germany way back in 1855 by a pencil company and was, since 1865, been owned by Schwanhausser family and has remained so for five generations. In 1996, the company was converted into a holding company. The company manufactures writing pens, colouring, cosmetics, markers and highlighters.
system principally used to control corporate sectors as well as direct them with the aim of ensuring ethical and appropriate conduct of business operations (Rayton & Cheng, 2004). Notably, the functioning of the Board of Directors (BOD) is an important consideration to ensure
The merger was between two firms Peat Marwick international (PMI) and Klynveld Main Goerdeler (KMG). PMI and KMG were two firms formed through merging of various firms in earlier years (KPMG, 1998). Therefore, KPMG can be said to have
Basically, the issue of corporate governance is mainly applied to companies that are publicly owned where there are different stakeholders with interests in terms of ownership, control and management. Under such circumstances, the Board of Directors has the
4 pages (1000 words)Coursework
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